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Both can cause problems.
In Storage, choose the drop-down and select the library on D: drive > Settings (the triple dots) > Remove Library. Then retry the add of the 'games' folder.
When I install the game, I can only choose the automatic location to C or D with the newly created library. If I try to select a location for the game, I get a message saying that the selected library folder is not empty. Also every time I try to select a game location, Steam opens the settings and asks me where my game library is. And again I see this same message that Steam library folder is not empty
Thank you, this is the solution to my problem. It looks like you can only create one library folder on your disk. When I tried to sort the problem, I selected D:\ and Steam created a D:\steamlibrary folder and as you said, I had to delete it and select the games folder. I also had to select D:\games\ and Steam found my library. It seems obvious now. Thank you very much for your help
If you ever end up wanting multiple libraries per drive, it's easy to do - steps are here: https://steamcommunity.com/discussions/forum/1/4365752495731649458/#c4365752495732171425